Oil prices plummet under $60 a barrel

31 Oct, 2008, 2321 hrs IST, AGENCIES

LONDON: Oil prices plunged under 60 dollars per barrel in London this week, while other commodities rose as traders tracked recession worries, volatile equities and the demand outlook for raw materials.

The price of oil has more than halved since scaling record heights above 147 dollars in July.

Oil prices dived to 17-month lows on global recession fears, hitting 59.02 dollars in London and 61.30 dollars in New York on Monday before clawing back some lost ground.

"Oil markets seem to be pricing in a deep and long recession that will derail oil demand growth this year and next," wrote UBS economist Jan Stuart in a research note to clients.

"Even though we still think that the credit crunch is exaggerating the real shift in oil demand trends, we have no way to know."

UBS also slashed its forecasts for average Brent oil prices to 60 dollars in 2009 and 75 dollars in 2010 from previous estimates of 105 and 116 dollars respectively.

Oil prices sank this week after data showed that the American economy -- the biggest consumer of energy in the world -- contracted at a 0.3 percent annualized pace in the third quarter as a global credit crunch saw consumers and businesses cut back on spending.

"Crude oil fell after the release of the US (growth) figures," said Dresdner Kleinwort analyst Peter Fertig.

"It is likely to head further down as declining US consumer spending could intensify the fear of falling oil demand. This would also be a drag on gold and other metals."

Crude prices had risen Wednesday after interest rate cuts in the United States and China boosted expectations of higher demand in the world's two leading energy consumers, analysts said.

Prices also found some support after the OPEC crude producers' cartel warned it could cut output further.

OPEC Secretary General Abdalla Salem El-Badri said Tuesday it could slash output again if prices keep falling. OPEC produces 40 percent of the world's crude oil.

At an emergency meeting in Vienna last week, OPEC ministers agreed to reduce output by 1.5 million barrels a day to 27.3 million bpd.

By Friday, New York's main oil futures contract, light sweet crude for delivery in December, had firmed to 64.50 dollars from 63.16 dollars last week.

Brent North Sea crude for December dipped to 62.07 dollars from 62.62 dollars last week.